Research On Legal Responsibility For Illegitimate Corporate Distribution

The principle of capital maintenance is one of the critical principles in corporation law, and it requires that corporations must often maintain assets equivalent to its amount of capital during its period of existence and must not reduce corporate capital unless it is through due process and in accordance with reason. Based on the principle of capital maintenance, corporations can only distribute assets to its shareholders when legal requirements are met and cannot return the financial contribution back to its shareholders in any disguised form. Accordingly, corporation law stipulates distribution rules for shareholders such as requirements for profit distribution, process and requirements for share buy-back, process of capital reduction and ban on withdrawal of capital. However, China’s corporation law does not systematically deliver detailed stipulations on civil responsibility for improper distribution, and only covers civil responsibility for withdrawal of capital, which can far from entirely cover responsibility of improper distribution. What’s more, there are irreconcilable contradictions and predicaments in regulations related to withdrawal of capital. Therefore, it is necessary to bring concepts, including but not limited to, withdrawal of capital, corporate capital reduction and profit distribution to the general concept of improper distribution, and build a systematic and complete setup of responsibility for improper distribution. The 1st chapter of this essay mainly analyzes the principle of capital maintenance and corporate improper distribution. The 2nd part mainly discusses the predicament of system of withdrawal of capital and the solutions accordingly. The 3rd part mainly discusses structure of civil responsibility for improper distribution.